Homesteaders in the Hood

Squatters are multiplying in the recession—what should cities do?

To survive, everyone needs to have a place to be and to sleep, eat, and, let's face it, go to the bathroom. For most of us, that place is the home. As rising unemployment pushes more people out of their houses and apartments, however, and growing numbers of Americans cannot find a place to perform these essential functions legally, they will have little choice but to break the law. And so some of them are turning to a strategy that has cropped up repeatedly in American history—squatting. Governments are sometimes tempted to respond to a spike in this form of outlaw residency by simply forcing squatters out. The better strategy, however is to treat squatting as a symptom of a simultaneous failure of both the market and the government. Viewed in this light, an outbreak of squatting is a sign that governments should change their housing policies to make it easier for poor people to find the housing they need—as law-abiders instead of renegades.

Squatting, or unlawfully occupying and making use of land that belongs to someone else, tends to emerge when poverty and homelessness intersect with absentee ownership. It was widespread on the frontier of the 19th-century West, where settlers who couldn't afford to purchase land at market prices often simply occupied land owned by Eastern speculators (as well as land owned by the federal government and by Native American tribes).

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From the point of view of local officials, this was a win-win, of a sort. Far-away owners were more interested in free-riding on rising property values, and flipping their land, than in developing it productively. So they resisted paying property taxes or investing in infrastructure. As a result, governments in the West were happy to lend squatters a hand in their efforts to get property out of the speculators' hands. Local governments frequently made it easier for squatters to obtain title through the legal doctrine of adverse possession (sometimes colloquially called "squatters rights")—for example, by shortening the time period required for squatting to mature into ownership. Ultimately, even the federal government joined in. After years of using the Army to chase squatters off its lands, Congress decided to create a legal avenue for settlers without money to become landowners: the 1862 Homestead Act.

A century later, in the 1970s, squatting went urban. In city after city, the market for urban housing collapsed amid a toxic (and self-reinforcing) brew of riots, redlining, and the flight of the white middle class to the suburbs. City governments acquired thousands of vacant units from owners who had fallen behind on their property taxes. Rather than turning these properties over to remaining low-income residents searching for affordable housing, many cities sought to auction them off to speculators, who in turn frequently fell behind on their own tax payments. In the meantime, the vacant buildings became magnets for crime and illegal dumping. In response, groups of squatters—backed by community organizations like ACORN—began to take over city-owned, vacant housing. Many city governments cracked down on the squatters, but others took a more measured approach, coming up with programs whereby urban "homesteaders" could acquire vacant housing through "sweat equity."

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As the current recession picks up speed, we are again confronted with the ingredients for a squatting boom. Unemployment is closing in on double digits nationally, and homelessness is on the rise. Between late 2007 and late 2008, the number of families presenting themselves at homeless shelters in New York City increased by 40 percent. In Massachusetts during the same period, the statewide increase was more than 30 percent. At the same time, housing vacancy rates are at all-time highs. According to the Census Bureau, about 15 percent of housing units in the United States were vacant during the last quarter of 2008. That's 19 million homes sitting idle, largely in the hands of banks. The difference between the 1970s and today is that the crisis last time was focused on the urban centers, while this time around the suburbs are the site of the greatest mismatch between people without homes and homes without occupants.

And so, the squatters are squatting. In Sacramento, Calif., a tent city has begun to sprawl out on land owned by a utility company on the banks of the Sacramento River. The cluster used to be a small homeless camp but has grown in recent months to several hundred residents, an increasing number of whom the Los Angeles Timescalls "recession victims." In Miami, where the foreclosure crisis has hit particularly hard, a group of families recently moved into foreclosed properties with the help of the advocacy group Take Back the Land. In Minneapolis, another group, the Poor People's Economic Human Rights Campaign, recently moved a dozen families into foreclosed housing.

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So far, local governments have split over how to handle the influx. The Atlantic recently documented the efforts of officials in San Bernadino, Calif., to keep squatters out: One officer had removed an unemployed nurse and her family five times from different homes in the community. In other cities, meanwhile, officials have decided to look the other way. Rep. Marcy Kaptur, D-Ohio, has even advised constituents who have been foreclosed to squat in their own homes by refusing to leave. Until he backtracked after negative publicity, Sacramento Mayor Kevin Johnson had considered making that city's tent encampment permanent and providing its residents with utility services.

But these ad-hoc reactions aren't really the answer. Squatting can be dangerous for squatters and can, depending on the circumstances, harm neighboring property owners by driving down property values, as neighbors of the Sacramento tent city have complained. At the same time, some of the danger and harm of squatting results from ill-advised efforts to keep them out, and squatters who take over boarded-up housing might actually improve neighborhood conditions and increase property values. Cities should therefore resist the temptation to respond to an increase in squatting by simply ratcheting up enforcement. Instead, governments should attack the problem on both the supply and the demand side.

On the supply side, local governments should penalize owners who stockpile vacant housing, perhaps by imposing increased property tax rates on properties left vacant, and by moving aggressively to seize vacant properties when the owners fall behind on paying those taxes. On the demand side, governments should expand homesteading programs that permit and help low-income people to take over vacant housing—but only after it finds its way into city hands.

To be sure, these programs were only marginally successful in the 1970s, in part because of lack of funding, but also because of the difficulty of restoring abandoned urban properties to habitable condition. The housing that is becoming vacant during the current downturn, by contrast, is relatively new and should be easier for homesteaders to repair. The federal government should also move quickly to protect those in financial trouble from foreclosure and eviction by requiring foreclosing banks (many of which are themselves receiving taxpayer bailouts) to rent out foreclosed homes to their former owners at fair market value. In fact, as this letter to the editor in the New York Times Magazine on Sunday correctly observed, allowing owners to remain as renters in their foreclosed homes helps safeguard the value of the houses—which is good for the occupants, good for the banks, and good for the housing market as a whole.

The sudden increase in squatting shows that the housing market that is out of kilter. The solution is not to chase squatters off, but to bring the market back into balance by helping them find a place to call home.

Eduardo M. Peñalver is a professor at Cornell Law School and co-author, with Sonia Katyal, ofProperty Outlaws.